reverse auction - Investment & Finance Definition
An auction process in which buyers announce their need for a product or service, and suppliers bid to fulfill that need. Reverse auctions are used to award new business to the supplier with the lowest bid. Unlike a typical auction, prices in a reverse auction decrease as the bidding process continues. Internet-based industry consortiums have created online marketplaces to run reverse auctions, as have independent, Internet-based companies. A car manufacturer may announce its intention to purchase tires and a reverse auction would be set to find tire sellers willing to sell their product to the car manufacturer. Contrasts with a regular auction where the seller is attempting to sell many products to many purchasers.